2020, has been a year unlike most in living memory. If you’d have asked the majority of us back in January that by March the world would be reeling from a global pandemic, recession would be hitting many countries, unemployment would be rife and entire industries would be shut down and the majority of the world would be placed onto work from home.
But here we are, all of the above has and is happening. The world has and is changing. Where we go next globally commercially professionally and socially is arguably the biggest unknown in our lifetime.
It’s at times like this that is vital to stay calm, pause, and take a breath and know that your plans for you and your family’s financial future are as strong as possible but also that your plans incorporate the new rules and regulations into the equation.
Everybody is trying to win with their financial planning, but nobody prepares should they lose.
Your author has been working in and around financial services for nearly fifteen years, and during his career, there has been one consistent theme.
Everybody wants to earn more, save more, buy more, and be more affluent and retire earlier with as much disposable income as possible and no debt. But at the risk of sounding woolly, the destination of financial freedom is the win, but what happens if you don’t get there. What happens if you lose.
What I’m asking you, is what does your Plan B look like?
What happens to my family and their financial future, if I am not around?
Now there are lots of discussions, planning, and advice sets that can be had around this subject but for now, let’s focus on Wills and Estate planning.
So what is a Will?
A Will is defined as: “A document that stipulates how you want your assets to be passed on in the event of your death and who you want to oversee the process”.
So, a Will is a simple legal document that states what you want to happen to the assets in your estate should you pass away.
Now let’s put logic to one side for a moment though and assume you simply do not care if your estate and assets are divided against your wishes.
But what about if you have kids?
How well does your Will and Estate planning fare in a post COVID19 world?
As this is currently being written, there is a two-week mandatory quarantine for all international arrivals into Hong Kong.
Now let’s play devil’s advocate for a moment, and assume you were to pass away or become mentally incapacitated. Let’s look at two scenarios.
Scenario 1. You have kids, and a Will.
Great, there is a legally recognised expression of your wishes to ensure distribution of your assets as you wish. And you have named permanent guardians for your children. But you have not named temporary or interim guardians.
Now let’s say the children’s permanent guardians do not live in Hong Kong, and have to fly in from Australia/UK/New Zealand/Canada/US and complete two weeks mandatory quarantine. There are no blood relatives in Hong Kong, hence the permanent guardians being overseas.
There is no legally recognised expression of wishes as to what happens to your children in this scenario, so they could potentially be taken into state care until their Permanent guardians are free to reunite with them.
Scenario 2. You have kids, but no Will.
Well, this situation is truly a disastrous one, not only is there no legally recognised expression of wishes as to the division of your estate and assets. But your kids have no legal instruction as to their future care and guardianship. No blood relatives in Hong Kong, nothing for the courts to prove who you wanted to care for your children. They, therefore, become wards of the state or wards of the court in scenario.
We will not get into a deep dive and opinions on Hong Kong’s legal system and wards of the court/state.
But what I am going to ask you is why you would leave either of the above scenarios to chance.
Now let’s talk Ordinance, and yes, we all know that there are many Ordinances in Hong Kong, so for clarity, these are areas to consider under “The Guardianship of Minors Ordinance”.
According to the Guardianship of Minors Ordinance, a parent may appoint any person to be a guardian of a child (being under the age of 18 years) after that parent dies and this could be done by a will or in writing executed in the presence of two witnesses. In the event of a parent’s death, the appointed guardian will automatically assume guardianship either alone or together with the surviving parent over the child in most circumstances provided that the appointed guardian accepts its office either expressly or impliedly by conduct.
In the absence of the appointment of a guardian by the parent, a guardian may also be appointed by the court. Any decisions made by the court will be in the best interests of the child, however, a parent will ostensibly be in a better position to make this decision as opposed to the court which will not have a direct picture of the family’s circumstances.
It is generally advisable to have a guardianship document in place laying out a parent’s wishes in respect of his/her choices of guardians and future arrangements for his/her child (including without limitation education curriculum). This could help to ensure that the child is placed in the care of someone the parent trusts as opposed to someone appointed by the court or the ward of the court.
Generally, in most circumstances, if a parent has only appointed one guardian for his/her children, such guardian would generally be the permanent guardian of the children and will assume guardianship over the children regardless of whether or not he/she has taken physical custody of the children. In such circumstances, there may be a time period in which the permanent guardian may not be able to care for the children immediately after the parent’s death. This rings especially true for those expats that have appointed permanent guardians who are living overseas.
To ensure that the children are under the care of those whom the parent trusts after the parent’s death, the parent should also consider appointing a temporary guardian who will only act as the guardian of the children during the period from the parent’s death to the moment the permanent guardian is able to take actual custody of the children.
It is advisable to include provisions regarding the appointment of temporary guardians in a separate guardianship document that specifically provides provisions regarding the appointment of a temporary guardian. This is so that it could provide a clear articulation of the parent’s intention of appointing a specific third party to care for his/her children for the time it may take the appointed permanent guardian to take custody of the children in the event of the parent’s death.
Appointment of guardians in the event a parent is unable to care for children
Incapacity or Quarantine Due to Covid-19 or Other Circumstances.
In Hong Kong, there is no statutory regime that enables parents to voluntarily delegate their responsibilities for their children. Even so, it is still preferable for the parents to have in place a “Deed of Temporary Guardianship” where the parents can express their wishes regarding guardianship. Although technically, such document does not have binding legal effect, it conveys to the authorities the wishes of the parents regarding care and control of their children. This is particularly important if the parents are unable to effectively communicate their wishes.
If anyone challenges the “Deed of Temporary Guardianship”, then a court order could be sought to confirm the appointment of the temporary guardian and such document could be a factor for the court to consider in relation to the appointment of a temporary guardian.
Life changes, be prepared, be protected.
Having read this I want you to remember two things.
Not having a Will or an up to date Will, can have a massively detrimental effect on your kids mental and financial well – being. Can you really envisage your kids not having a family member or close friend being there for them immediately after they’ve lost you?
Address it, be the Meerkat, not the ostrich. Protect your family and do not stick your head in the sand. A legally recognised expression of your wishes in the form of a Will would cost on average a good family dinner out for four people.
Nobody wants to think about the worst happening, but if it does happen, you and your family will be glad that you are well prepared.